Most of us are rich compared to previous generations, but we are surrounded by talented storytellers who tell us otherwise. These storytellers are paid handsomely to change our perception of the world, because they want us to buy more stuff. Humans love stories, it is how we try and make sense of the world around us, but because of this the stories and myths are powerful, precisely because they frame our thinking.

Somebody asked me recently if I could give them something actionable they could do to be more frugal. I gave a bit of a double-take, because I don’t particularly regard myself as frugal, but I’m game for it. But first I gave it some thought – what does frugal mean to them? I have a sneaking suspicion that being frugal means something different now than what it used to mean. Nowadays, I would venture for most people the definition is

How the hell did we get here? In previous generations not spending more than you earn was the default assumption, frugality was either spending less than you earn, or having to spend as little as possible because your household income was seriously constrained. We’ve shifted a long way to where the norm is spending up to your ability to raise credit.

The fallacy that credit increases spending power

Look at MoneysavingExpert’s forums. There are three forums devoted to credit cards. The first – Credit Cards – is about the normal usage and abusage of credit cards, with the emphasis on the latter. The one about Stoozing (free cash from credit cards) is a misnomer these days – you can’t get free cash from credit cards, though it used to be possible 2

credit card mandala

The next one is Credit File and Ratings, which is all about people bitching about not being able to borrow yet more money because they are perceived a bad risk – either they defaulted previously or they’re just not rich enough. MoneySaving Expert should simply put up a big pop-up dialogue box when anyone posts on this board saying

HAHA – Consumer Sucka – you have already borrowed more money than you can afford, Stop. Wrong Way, Turn Round now. Pay some back or Just. Stop. Overspending.

But they don’t. Presumably there’s money in it for MSE 😉 The questions on that board about how to become a better risk (borrow less, pay some back)are far and few between compared to the ones about ‘what is the best way to game this faceless system so I can borrow more money because I Must. Have. Now?’

Spending Power ≠ Cashflow

The trouble is that credit is not there to increase spending power. It is there to manage cashflow.This was much more apparent in the early ads from the 1970s

I’m Access. he’s MoneyHere’s a new way of looking at us

I won’t run out on you. He will. Money does a wonderful disappearing act. Usually in the wrong place at the wrong time. But I’m always in your pocket, ready to buy what you need, when you need it. And when Money isn’t big enough to pick up the bill, which he often isn’t these days – you can call on me to get things settled.

I’m flexible. He’s not. My flexibility means that when he’s stretched, I’m not. Using me, you can buy essentials immediately and spread the repayments over whatever period of time suits you best. At this time of year, you could call on me to buy all the presents, drinks, decorations, everything. In fact you could give Money a complete Christmas break. He looks like he needs it.

You can see some of the rot setting in, the first paragraph talks of needs and the second starts off with essentials. it then all goes titsup when there’s the mention of Christmas. Christmas is a want, even if you have children. It is not a need. If the choice is paying the rent or paying for Christmas, let Christmas go hang – your kids need a roof over their heads more than they need consumer tat.

Around Christmas 42 years later from the ad this TV producer can’t qualify wants for needs, never mind introduce her daughter to the sad fact that you can’t always have what you want in life. Thatcher, bless her simplistic heart, believed that

her vision of Britain was of a property-owning democracy of savers with moral restraint. She got indebted spendthrifts. She wanted the British people to be like her father, but they turned out more like her son.

The cashflow function of credit cards still holds. One of the best ways for a retiree with a steady income to use a credit card is in fact as an emergency fund. This was cited by Jacob ERE and indeed he also cited the exception which is why an Ermine doesn’t use that – I have no income 3. A retiree with a pension has a steady income, so he doesn’t need to carry a cash float against modest emergencies, and for major ones like house burning down there is insurance. If the roof leaks they can use the credit card, and pay it back over a couple of years. Emergencies shouldn’t be a regular occurrence, else they are normal costs of operation and maintenance.

It’s questionable whether an employed person can use the same method, depends on how likely they are able to find another job if they get fired, because that’s a very likely sort of emergency in one’s working life. All other uses of credit cards that carry a balance are basically a way to pay more for for less. Say you are one of MSE’s Consumer suckas carrying a balance of £20,000 on a 5% APR card. To put a dent in that loan you have to spend less than you earn, which you don’t want to do, and say you buy £10,000 worth of stuff each year and pay off £11000 on the card. So you carry the loan. Effectively you are buying £10,000 worth of goods for £11,000. Well done you. It’s like looking out for anti-sales – everything must go – 10% dearer today. Of course you’ll chase the cashback and the Clubcard points and sing about the 1% off. It is, after all, a much nicer story than the 10% you’re paying over the odds year on year.

More credit means we get into arms races with each other

One fellow, presumably a dyed-in-the-wool laissez-faire free-marketeer, opined that the increase in credit kicked off by Margaret Thatcher relaxing credit controls in the early 1980s that I ranted about here was a good thing. We all, pure intellectual rational agents that we all are, decided that we would use this money to sink shitloads of money in increasing the price (not the value, the price) of houses, because free markets and free agents brought us this result so it was obviously what we all wanted. In the same way as our tax pounds going to Help To Buy has had the thrilling effect of raising house prices by £8000 because as any fule kno what first time buyers really really want, is for some kind fairy godmother to give all the other blighters they are in competition with some extra money so they have to pay more for the house.

I’m of the opinion that sometimes you shouldn’t be allowed to do what you want to do, but presumably I’m a Trotskyist dirigiste rather than a follower of Ayn Rand. More consumer credit is fundamentally bad, because it encourages people to live beyond their means. It still beats me why it is allowed so much – it’s not like it actually lets people Buy More Crap. To be honest if they were buying their consumer goods without credit they’d be buying more goods and services – our MSE Consumer Sucka could be buying £11,000 worth of Consumer Crap rather than £10,000 worth and sponsoring a bank with the remaining £1000 p.a. – what’s so special about banks that they deserve a 10% tithe of his contribution to GDP?

This is part of the evil heart of darkness behind the way we have set up our economy – it demands that we chase the endless more, and indeed credit does let us get more faster – and then we get a little bit less for our money as we service the deadweight interest of the loans. That way madness lies, and it’s called a Money Shop. WTF is the price of money in a money shop? Any time you are paying more than £1 for £1 you should be asking yourself why.

The myth of progress being the endless more

Let’s say we have some technical advance that means it costs half as much to produce product X. We can use that in two ways. We can rejoice that we only need to work half as long to buy the same amount of X as we had before, and then use the rest of our time to spend more time with loved ones, do something else more interesting than working with half our time. Interestingly enough, you 21st century wage slave are probably getting the short end of the stick here compared with mediaeval peasants, because what we do with greater productivity isn’t take more time off 4, which is what people initially did with improvements in efficiency. Presumably the advantage the peasants had over us is that since a day’s travel on horseback is about 20 miles there was a limited supply of replacement labour ready to ride in from out of town and undercut them; whereas if you want to take a sabbatical in a highly paid industry you may find yourself out of a job unless you are unique or can nobble the competition. As a result you start to see success as the endless more, because it’s hard to vary your time at work 5, unlike the peasants.

Mo’ betta

We buy more, or we simply pay more for stuff we need, like housing. Funny old world, isn’t it? Say you were a Martian and got out of your shiny green spaceship and looked at how western consumer culture worked. You’d scratch your head and go WTF? These guys are surrounded by historically stupendous abundance, and they charge round like blue-arsed flies after more of this abundance, then grouch to each other how they never have time to see their kids?

The trouble is those stories we tell ourselves – success is always faster, better, cheaper, more. That assumption underlies so many of the stories that surround us that we start to believe it’s true. More is not always better – for instance it appears that we are becoming fat bastards because average portion sizes are slowly being ramped up. The connection with more=better means we waste a fifth of the food we buy.

Mo’ betta’s evil twin, hedonic adaptation

We notice differences more than absolute levels, above certain limiting thresholds. Which means our appetite for more is limitless, if we just follow our instincts. That’s taken humanity to some bad places in terms of excess consumption. In the 1970s your British middle class family might have gone on a foreign holiday every other year. From looking at Facebook it seems four times a year is the minimum these days. Now granted it’s got cheaper, but are they having four times as much fun? The experience of flying anywhere truly sucks nowadays compared to 20 years ago, you can say two good things about it – it is much cheaper and you get there a little faster. Just about everything else is worse. And yet more is more…

Curiously enough, it’s easy though rarely done to nut hedonic adaptation – increase the gap between your hedonic experiences, and if possible make the gaps variable. If you want to pay a few hundred on a restaurant, do it every six months or yearly. It will be more special to you than spending the same amount of money per year on something more quotidian, or shudder, a weekly stop at Mickey D’s 6. You probably need to squeeze the gaps out to quarterly or more to avoid normalising on the experience.

We are programmed to buy

Let’s take a little bit of sage advice from this dear waif who delivered herself of the deathless wisdom that if you have savings in your twenties, you’re doing something wrong. Unlike many in the PF scene, I actually have some sympathy for the message in the title, largely from a cycle-of-life point of view – it is very hard to get started as an independent adult and always has been. Sometimes you have to pay out all your income, to be honest if you are in your twenties and just avoid spending more than your income I’d say you’re doing a damn sight better than most of your peers, who come on MSE’s credit card forums all dazed and confused why they are getting dunning letters. Let’s examine the random noise that passes for cognitive thought in our waif’s cranium, and see if we can detect any coherent signal.

I don’t have any savings, but I also don’t have any wants.

Crikey, this young lady has discovered Zen Nirvana a long time before this greybeard. I am in awe of her precocious wisdom, she’s obviously up on the literature of Thoreau, who delivered himself of the same message more poetically

A woman is rich in proportion to the number of things which she can afford to let alone.

Hats off to you, Lauren. Unfortunately it all goes pear-shaped right after that

don’t know about you, but I like to enjoy my life. I like to go out to eat, buy clothes I don’t “need” and spend money with friends on memorable nights out.

Hmm, so what exactly are these wants you don’t have? For starters you have associated enjoying your life with spending money, enough to enumerate a bunch of manufactured experiences, clocking ERE’s trifecta in two lines

In general, if you ask the average consumer what enjoying life is all about, it distills to the following trifecta: buying tickets, going to restaurants, and shopping.

Well done Lauren. Hero to zero in the first paragraph. She does go on to make some fair points that young people may delay reaching some life stages compared to their parents; this is not unreasonable if they are going to live longer. I have much sympathy with the longer adolescence theory – I wasn’t an adult at 18 and probably only just at 21, which was where the threshold of adulthood used to be considered before the 1960s. So that’s the long explanation of how we got to living within your means being considered frugal these days. Too much Lauren YOLO. Anyway, back to our frugalista:

Ermine to wannabe frugalista – live intentionally

What is something that a typical consumer could do? Live more intentionally. We make most of our decisions about spending in a framework of do we have enough money. And yet we are selling precious minutes of our life here. Here was my idea for the prospective frugalista, the techniques are not original to me, but it’ll do:

For the next week, note everything you spend. At the end of the week, look back over it, and ask yourself – did this enhance my quality of life proportionately? Classify into wants – that’ll be all of Lauren’s purchases, and needs – tickets to work, groceries etc.

Work out how much time you have to spend going to work (including commuting time) to pay for it – if you earn £80k for a 200-day 8-hour day + 4 hours commute and take home £54k p.a. net and pay £2k on commuting then your hourly rate is 52,000 ÷ 200 ÷ 12 = £22/hr

Armed with this insight, for the next week, simply delay buying any Wants for 24 hours. The next day, ask yourself if you want to buy this Want, and if the answer is yes, knock yourself out

These helped me; I still use the technique of waiting for 24 hours for some things. For some people it works well enough to take five and attune to whether this purchase is really worth it to them. The 24 hour delay is usually enough to get yourself into a different emotional frame of mind, and this often enough to split off something that looks like a good idea at the time from something that looks like a good idea all the time. It easily halves wants.

The reason this works is because it is often how you spend your time that matters, rather than how you spend your money. Armed with that knowledge you can often get better value for your money – the stories the ad-men tell us are that it’s all about the money. That’s bollocks – it’s often more about the who, the how, the when and the why. But these are elements not in the admen’s control, so they push the story that it’s about how you spend your money.

This is one of the reasons early retirement can work well, even though it is never a wise thing to do financially – you always have more money if you work longer. But if time matters more than money for many experiences, the trade can be a win, and many things are much cheaper if you can take longer or be flexible on timing. You can never have enough money to feed every Want, so the secret is in knowing yourself well enough to discriminate between your wants. Some of them are your wants, but all too many of them are illusory, the background radiation of an economy that needs the endless more to survive. As time goes by it’s about the who and the how and the when and the for how long, and less about the what. There’s a delicate balance in all these parameters, and only a very faint sound of Thoreau’s distant drummer to guide you to your inner voice. The rest is the boorish shouting of admen and sales types who want you to sponsor their dreams.

Notes:

For the sake of completeness I’d make the integration time a calendar year, to catch all recurring costs ↩

Some people labour under the misapprehension that cashback, topcashback, points et al are free money. They aren’t. You are being slightly overcharged for your goods and then sell a bit of your headspace to the card companies to normalise increased spending in return for a little bit of cashback. You save far more than the cashback by just buying 5% less consumer shit. But each to their own – believe the story you want to hear if you like ↩

this is increasingly untrue because my ISA throws off a fair bit more income that I would get claiming JSA, but since I reinvest that I don’t count it as income ↩

there is an argument to be made that early retirement is one way of taking more time off ↩

this is more an aspect of working for an employer – if you are a contractor or you are The Boss you have some flexibility here ↩

£560 for two incl wine at Raymond Blanc’s joint is about the same cost as a year’s worth of weekly Big Mac meals for two in Oxford ↩